How to Buy the Housing Recovery

By: Minyanville

Posted: 5/29/2013 10:45:00 AM

Referenced Stocks: EQR;SNH;TOL;WY

The government's biggest stimulus target is now the housing
industry. More than any other industry in which we can invest,
housing has a mandate to be successful. Without a housing rebound,
the economy has little chance of becoming self-supporting again.

Besides the long-term capital gains we can expect, housing also
offers a good way to convert paper and electronic "wealth" into
real, tangible wealth. In addition, real estate is usually a great
inflation hedge.

If you put all the attractions of the housing sector together, you
get what I believe is a compelling case for making an investment.

A housing recovery is already underway, but it's still in its early
stages. I think prices will start to move much higher this summer.
The big question is, how much higher are prices likely to go from
this point?

If you look at the cost of buying a home (including mortgage
payments, taxes, and insurance) as a percentage of personal income,
housing is more affordable today than it has been in decades.

Today's low mortgage rates reduce the total cost of a home by many
thousands of dollars - often hundreds of thousands of dollars. That
means buyers can pay more for houses than they could when rates
were higher - and that's just what they are doing.

For broader exposure to the sector, we suggest
Weyerhaeuser
(
WY
). New construction is consuming large amounts of lumber and other
building materials. One of the biggest suppliers is Weyerhaeuser.

Weyerhaeuser is also a diversified housing company that builds
homes and develops residential lots for construction and sale. In
addition, the company builds multi-use developments and
master-planned communities.

Another division of Weyerhaeuser produces a wide range of paper
products for various industries. I think the stock will be a good
performer in long-term accounts.

If you would like to combine current income with the probability of
attractive capital gains, I recommend
Senior Housing Properties Trust
(
SNH
). This successful REIT invests in retirement housing, assisted
living facilities, nursing homes, and hospitals. The company has a
total of 184 properties located in 41 states.

Because SNH is organized as a REIT, it doesn't need to pay income
tax if it distributes at least 90% of its earnings to
shareholders-which it does. Currently the yield is an attractive
5.6%.

With America's baby boomers now entering their golden years, I
think Senior Housing has a bright future.